Techno Wrap: Market in an intermediate downtrend

The main indices finished little changed at the end of a choppy week, with the Sensex ending 0.20% or 40.81 points higher, and the Nifty 0.06% up. The CNX Midcap Index did better, with a gain of 1.11%. TCS was the biggest winner among index stocks with a 9.4% gain.

The other index stocks to go up included Reliance Industries, Cipla, Hero Honda and Reliance Communications with gains between 3.9% and 1.9%. Sterlite Industries was the biggest loser among index stocks with a 5.8% loss. The other index stocks to go down included Wipro, HDFC, Jaiprakash Associates and Tata Steel with losses falling between 5.3% and 2.9%. Pipavav Shipyard was the biggest winner among the more heavily traded non-index stocks with a 20.9% gain.

The other non-index stocks to go up included Ashok Leyland, Indiabulls Financial, Canara Bank, SREI Infrastructure Finance, Biocon, Shree Ashtavinayak Cine Vision and Petronet LNG with gains between 15.9% and 10.3%. Aegis Logistics was the biggest loser among the more heavily traded nonindex stocks with a 13.5% loss.

INTERMEDIATE TREND:The market is going through a mild intermediate downtrend which has been on since October 14 for the Sensex and Nifty. The downtrend would end if the Sensex crosses 20,350 and the Nifty gets past 6,150. The CNX Midcap started its downtrend earlier on October 7, and this may have already ended. A fall below 9,275 would indicate that a downtrend is still on for that index. Most global markets are in intermediate uptrends, with Tokyo and Brazil being the main exceptions.

LONG-TERM TREND:Our market's long-term trend remains up. The levels below which a bear market would be signalled are best taken to be 17,300 for the Sensex, 5,200 for the Nifty, and 7,350 for the Midcap Index.Most global markets also appear to be in bull phases now, though they could be in a larger sideways range as we had been for nearly a year.

TRADING & INVESTING STRATEGIES:The market is in an intermediate downtrend which has run for over a week, and a little additional long-term portfolio exposure can be taken now. Some more may be taken once an intermediate uptrend is confirmed. At this stage, it is best to confine selections to stocks which do not go down more heavily

than the indices during larger market corrections.

GLOBAL PERSPECTIVE:Most global markets are in intermediate uptrends. The Dow would enter a downtrend if it breaches 10,875. Most markets also appear to be in longer-term uptrends as well. The Dow would go into a bear market if it goes under 9,900.

The Sensex gained 20.7% in the twelve months that ended on Thursday, up a place to the 7th rank among 35 well-known global indices considered for the study. Sri Lanka continues to head the list with a 123.4% gain. Indonesia, Chile, Turkey and Denmark follow. The Dow Jones Industrial Average has gained 10.6% and the NASDAQ Composite gained 13.6% over the same period. (These rankings do not take exchange rate effects into consideration).